Chief Investment Officer
BirdsEye Viewwealth management business development
Loan demand is slack, but customer receptivity to wealth management services is increasing. Disenchantment with investment banks and megabanks led many wealth management clients to consider and seek new providers among community banks. For community banks with wealth management capabilities, it’s time to plan a methodical approach to capturing this opportunity.
Investment management has traditionally been the most profitable segment of the WM business, and today the field is wide open. Client shifting is very limited in the investment management and trust space, but market dislocation and reputational risk have induced more clients to consider other options. “Boring is good” in the WM business these days.
Unfortunately, the typical trust officer, while excellent in their job, is not an effective sales person. They are good hand holders and portf0olio services, and often solid technically. But, traditionally, they lack the aggressive sales drive that is needed to make meaningful advances in snagging market share. In other words, trust officers have typically not been the most effective sales force.
In contrast, private bankers have traditionally been sales people. They often are commercial lenders to professional and executives (the old “P&E” space), or upscale retail bankers who excelled in selling. Yet, in most banks, their role remains poorly defined. An interesting breakthrough in staffing and managing the function has been to identify the PBs as the main sales force for all WM services. Selecting experienced commercial bankers to the position is an important step to build credibility to the unit among the commercial bankers in the bank, who typically provide the most productive referrals to WM. Another important component is their pay structure, which should approximate a BDO pay if they are to become the primary sales force for the business. In other words, paying them a salary plus percent of fees sold, in additional to effective staffing, is important.
One of the main obstacles to sales is lack of product knowledge. PBs should be deep generalists and highly professional. Successful PB sales professionals often have 15-20 years experience, and are (or strive to be) Certified Financial Planners. They need to be well versed in WM products as well as have sufficient familiarity with other bank product lines to truly bring the entire bank to bear.
Sales teams, spearheaded by the PB, are the best way to apply a broad product set solution to the bank. This means intense pre-call planning and joint calling with the referring banker (typically the commercial banker) as well as others whose product suites might be relevant to the client. It also means that credit must be shared with the referrer, in order to avoid a trap we often fall into – creating zero-sum games among our sales forces.
We complain about silos, but we create them ourselves with incentives that ensure competition, since one man’s gain is another’s loss. In our zeal not to overpay we can become penny-wise and pound-foolish. My suggestion: budget a percentage of the profit to be given out as incentives, not more than 50% of first year’s fees, and use that “kitty” to share among the referrer, door opener, subject matter expert and closer. This way you ensure the shareholders get their share first, and that it literally pays to refer and close business for other parts of the bank.
Another facilitator to effectively selling WM products across the bank is cohabitation. Put your WM and PB professionals next to your commercial bankers. Familiarity breeds trust!
And, when you structure incentives, pay more for the second product sold to the client (and USED by them), even more for the third, etc. such that cross-selling becomes truly valuable to the sales forces you have.
Also, consider (gulp) building your incentives such that the PB gets paid the same percentage regardless to the product. True needs-based selling means that the sales person focuses only on the customer needs and sells them everything they need but nothing else. One way to motivate any sales person to do so is to make them indifferent among the products they sell. In other words, say you pay 10% of first year fees for ALL products. Of course, the larger the fee, the greater the incentive, which effectively aligns the sales person’s interests not only w2ith the customer’s, but also with the shareholders.
Another good way to ensure the sales person focuses on the customer first is to ask them not to mention bank products for the first meeting or two. They must become good listeners then, and develop a deep understanding of the client before they offer solutions.
One way to build great support for the PBs is by identifying a small pool of product “sages”, highly experienced, sought after professionals who are both subject matter experts and are well known in the community. These people can create leads and lend technical expertise and credibility by associating their personal brand and cache with the sales force, opening the door and join calling as needed.
In sum, as you contemplate growing your wealth management business this year, consider the following:
· Clear job definition and responsibility for sales
· Effective staffing by commercial bankers
· Solid incentives
· Strong product knowledge across the board
· Enforce customer focus first vs. product selling